The DCIT, Circle-1(2), Ahmedabad V. Shri Parthiv A. Patel, Ahmedabad

ITA 141/AHD/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9321 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 24-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 19-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRI
• Assessee Lawyers: OMKESH
• Keywords: Depreciation; Business expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD I BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NOS.140 & 141/AHD/2016 (ASSESSMENT YEARS: 2009-10 & 2012-13) DCIT, CIRCLE-1(2), AHMEDABAD APPELLANT VS. SHRI PARTHIV A PATEL, 13, NILIMA PARK SOCIETY,B/H RASRANJAN, VIJAY CHAR RASTA, AHMEDABAD RESPONDENT PAN: AIDPP3798B /BY REVENUE : SHRI BYOMKESH PANDU, SR. D.R. /BY ASSESSEE : SHRI HEMAL DESAI, A.R. /DATE OF HEARING : 24.01.2017 /DATE OF PRONOUNCEMENT : 31.01.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE TWO REVENUES APPEALS FOR ASSESSMENT YEARS 20 09-10 & 2012-13 ARISE AGAINST THE CIT(A)-10, AHMEDABADS SEPARATE O RDERS DATED 16.11.2015 & 18.11.2015 IN CASE NOS. CIT(A)-10/DCIT CIR-1(2)/6 05/14-15 & CIT(A)- 10/DCIT CIR-1(2)/606/14-15, IN PROCEEDINGS UNDER SE CTION 143(3) R.W.S. 147 ITA NOS. 140 & 141/AHD/2016 (DCIT VS. SHRI PARTHIV A PATEL) A.YS. 2009-10 & 2012-13 - 2 - OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT IN THE FORMER ASSESSMENT YEAR AND U/S.143(3) IN THE LATTER ASSESSMENT YEAR. 2. THE REVENUES SOLE SUBSTANTIVE GROUND IS IDENTIC AL IN BOTH THE ASSESSMENT YEARS PLEADS THAT THE CIT(A) HAS ERRED I N DELETING ADDITION OF RS.30,92,801/- OUT OF RS.31,73,928/- PERTAINING TO DIRECT AND INDIRECT EXPENSES IN FORMER ASSESSMENT YEAR AND FROM RS.45,8 8,255/- TO RS.45,16,589/- IN LATTER ASSESSMENT YEAR; AS MADE B Y THE ASSESSING OFFICER. 3. WE COME TO RELEVANT FACTS NOW. THIS ASSESSEE DE RIVES INCOME FROM PLAYING CRICKET SPORT, SPONSORSHIP AND MARKETING. HE CLAIMED VARIOUS EXPENSES UNDER THE HEAD BUSINESS DEVELOPMENT, OFFIC E, SALARY, OFFICE RENT, OTHER INTERESTS, PETROL EXPENSES, REPAIR/MAINTENANC E, TELEPHONE, TRAVELLING, VEHICLE, STATIONARY AND DEPRECIATION TOTALING TO RS .31,73,928/- IN FORMER AND RS.45,88,255/- IN LATTER ASSESSMENT YEAR AGAINST EA RNING OF INCOME FROM PLAYING CRICKET SPORT. THE ASSESSING OFFICER SOUGH T HIS JUSTIFICATION SO AS TO PROVE A DIRECT NEXUS BETWEEN THE ABOVE EXPENSES AND THE INCOME IN QUESTION. THE ASSESSEES IDENTICAL REPLY IN BOTH ASSESSMENT Y EARS PLEADED THAT HE RECEIVED VARIOUS INCOMES FROM ENDORSEMENT CONTRACT EXECUTED WITH BCCI, GCA, RIL AS DECLARED UNDER THE HEAD INCOME FROM B USINESS & PROFESSION. HE SOUGHT TO CLARIFY THAT THE EXPENDITURE IN QUESTI ON WAS TO OVER LOOK HIS PERSONAL/PROFESSIONAL ASPECT LIKE CONVEYANCING, LE GAL MATTERS, LAISONING AND PHYSICAL FITNESS ETC. IN ORDER TO REMAIN PROFESSION ALLY FIT TO PLAY THE ABOVE CRICKET SPORT. THE ASSESSING OFFICER DECLINED TO A CCEPT THE SAME ON THE GROUND THAT SINCE THE ASSESSEE HAD BEEN DERIVING MA TCH FEE AND RETAINERSHIPS FROM VARIOUS CRICKET BODIES, THEY DID NOT INVOLVE A NY BUSINESS OR PROFESSIONAL ACTIVITY. HE FURTHER REITERATED THAT ASSESSEES PL AYING CRICKET WAS NOT AKIN TO A TRADING OR MANUFACTURING OR ANY SERVICE ACTIVITY. THE ASSESSING OFFICER THEREAFTER CONCLUDED THAT THE EXPENDITURE IN QUESTI ON IS NOT ATTRIBUTABLE TO ANY ITA NOS. 140 & 141/AHD/2016 (DCIT VS. SHRI PARTHIV A PATEL) A.YS. 2009-10 & 2012-13 - 3 - BUSINESS OR PROFESSION SO AS TO BE TERMED AS BUSINE SS EXPENDITURE ALLOWABLE UNDER THE PROVISIONS OF THE ACT. ALL THIS RESULTED IN DISALLOWANCE OF EXPENSES HEREINABOVE IN THE TWO ASSESSMENT YEARS IN QUESTION . 4. THE ASSESSEE PREFERRED APPEAL. THE CIT(A) PARTL Y REVERSES ASSESSING OFFICERS ACTION IN BOTH ASSESSMENT YEARS AS INDICA TED IN REVENUES PLEADINGS AS UNDER: 3. DECISION:- SUBMISSIONS MADE BY THE APPELLANT HAVE BEEN CONSIDE RED WITH REFERENCE TO THE ASSESSMENT ORDER PASSED. ONLY EFFECTIVE GROUND OF APPEAL IS AGAINST THE ADDITION OF RS.31,73,9287- MADE BY THE AO BY DISALL OWING VARIOUS EXPENDITURE CLAIMED BY THE APPELLANT. THE AO STATED AS UNDER IN THE ASSESSMENT ORDER:- 'THE REPLY OF ASSESSEE CONSIDERED CAREFULLY AND FOU ND THE SAME IS NOT ACCEPTABLE. THE ASSESSEE IS A CRICKETER AND REPR ESENT INDIAN CRICKET TEAM DURING THE YEAR CONSIDERATION. HE WAS DERIVING INCOME FROM BCCI MAT CH FEE, IPL MATCH FEE, RETAINERSHIP FEE. ETC. THERE IN COME WAS GENERATED FROM PLAYING OF CRICKET NOT FROM DOING MY ANY BUSIN ESS OR PROFESSIONAL ACTIVITY. THEREFORE, IT CANNOT BE SAID THAT THE ASS ESSEE IS DOING ANY BUSINESS OR PROFESSION. THE SOURCE OF INCOME FROM WHERE INCO ME DERIVED DOES NOT FALL UNDER SOURCE OF BUSINESS OR PROFESSION. THE AS SESSEE IS NOT DOING ANY TRADING ACTIVITY NOT ANY MANUFACTURING ACTIVITY NOR ANY ACQUIRED ANY QUALIFICATION FROM WHICH IT CAN BE SAID THAT HE IS DOING PROFESSION. THEREFORE HE IS ALSO NOT DERIVING INCOME FROM PROFE SSIONAL ACTIVITIES. THEREFORE IT IS VERY MUCH CLEAR THAT THE EXPENDITUR E CLAIMED BY THE ASSESSEE IS NOT ATTRIBUTE TO ANY BUSINESS OR PROFESSION. IN VIEW OF ABOVE THE EXPENDITURE OF RS.31,73,928/- CLAIMED BY THE ASSESS EE AS BUSINESS EXPENDITURE IS NOT AN ALLOWABLE EXPENDITURE. ACCORD INGLY AMOUNT OF RS.31,73,928/- IS ADDED TO THE INCOME OF THE ASSESS EE. PENALTY PROCEEDINGS U/S.271(L)(C) INITIATED FOR FURNISHING INACCURATE P ARTICULARS OF INCOME LEADING TO CONCEALMENT OF INCOME.' 3.1 THE AO STATED THAT AS THE APPELLANT IS A CRICKE TER AND THEREFORE NO EXPENSES IS REQUIRED TO HAVE BEEN MADE FOR EARNING THIS INCOME. THE AO HAS NOT CONSIDERED THE INCOME OF THE APPELLANT FROM BUSINESS OR PROFES SION. 3.2 ON GOING THROUGH THE REASONS FOR MAKING THESE A DDITIONS AND SUBMISSIONS OF THE APPELLANT, THE DISALLOWANCE OF ALL THE EXPENSES MADE BY THE AO ARE NOT FOUND JUSTIFIED. THE APPELLANT IS A WELL KNOWN CRICKETER AND RETURNED INCOME OF RS.1,53,20,056/- FOR THE YEAR UNDER CONSIDERATION. TO EARN THE SAID INCOME, THE APPELLANT HAD TO IN INCUR SOME EXPENDITURE. PLAYING CRICKET IS THE PROFESSION OF THE APPELLANT AND TDS WAS ALSO DEDUCTED CONSIDERING THE RECEIPTS OF THE APPELLANT AS PROFESSIONAL RECEIPTS. THE FINDINGS OF THE AO THAT EXPENDITURE IS NOT ALLOWABLE, IS NOT LOGICAL FOR THE SIMPLE REASON THAT ANY EXPENDIT URE INCURRED FOR EARNING THAT ITA NOS. 140 & 141/AHD/2016 (DCIT VS. SHRI PARTHIV A PATEL) A.YS. 2009-10 & 2012-13 - 4 - INCOME, UNDER ANY HEAD OF INCOME IS AN ALLOWABLE EX PENDITURE AS PER THE PROVISION OF THE ACT. 3. THE APPELLANT CLAIMED THE FOLLOWING EXPENSES IN THE P & L ACCOUNT AS ON 31.03.2009. PARTICULARS L-APR-2008 TO 31-MAR-2009 DIRECT EXPENSES 6,15,320.00 1 CRICKET EXPENSES 2,60,200.00 TRAINING & FITNESS EXP 3,55,120.00 GROSS PROFIT C/O 1,86,86,903.30 1,93,02,223.30 INDIRECT EXPENSES 32,71,158.69 ACCOUNTING CHARGES 24,000.00 BANK CHARGES AND INTEREST 27,014.63 BUSINESS DEVELOPMENT EXP 4,22,296.00 DEPRECIATION EXP 3,51,359.09 INSURANCE EXPENSES 17,727.00 LOAN PROCESSING CHARGES 5,183.00 MISC EXP 23,304.00 OFFICE EXPENSES 2,42,020.00 OFFICE RENT 1,08,000.00 OTHER INTEREST 2,05,733.77 PETROL EXP 2,80,106.48 REPAIR AND MAINTANANCE EXP 17,450.00 SALARY EXPENSES 8,46,718.00 STATIONARY EXP 10,248.00 TELEPHONE EXP 95,856.24 TRAVELLING EXP 5,13,717.48 VEHICLE EXP 80,422.00 NET PROFIT 1,56,44,289.01 TOTAL 1,89,15,447.70 ON GOING THROUGH THE P/L ACCOUNT AS REPRODUCED ABOV E, THE APPELLANT CLAIMED RS.6,15,320/- AS DIRECT EXPENSES AND RS.32,71,150/- AS INDIRECT EXPENSES. THE AO DISALLOWED SOME OF THE EXPENSES IN TOTAL OUT THESE EXPENSES. WITHOUT INCURRING EXPENDITURE, APPELLANT WOULD NOT HAVE BEEN ABLE TO EARN THE SAID INCOME. INCOME OF ITA NOS. 140 & 141/AHD/2016 (DCIT VS. SHRI PARTHIV A PATEL) A.YS. 2009-10 & 2012-13 - 5 - RS.1.53 CR. COULD NOT BE EARNED WITHOUT ADEQUATE SU PPORT AND LOGISTICS. THE APPELLANT AS TO MAINTAIN HIS OFFICE AND TRAVEL ACROSS THE WORLD TO EARN THE SAID INCOME. THEREFORE, THE EXPENSES CLAIMED BY THE APPELLANT ARE FOUND GENUINE LOOKING TO HIS INCOME RETURNED FOR THE YEAR. HOWEVER, ABOUT THE INDIRECT EXPENDITURE, OUT OF THE FOLLOWING EXPENDITURES, PERSONAL ELEMENTS CANNOT BE RULED OUT: (I) PETROL EXPENSES RS.2,80,106 (II) REPAIR & MAINT. EXP RS.17,450 (III) TRAVELLING EXP. RS.5,13,717 TOTAL RS.8,11,273 AS MENTIONED ABOVE, OUT OF THE TOTAL EXPENDITURE OF RS.8,11,273/-, I CONSIDER 10% OF THE SAME I.E. RS.81,127/- AS INCURRED FOR PERSON AL PURPOSES AND ADDITIONS TO THAT EXTENT ARE CONFIRMED. REMAINING ADDITIONS OF RS.30,92,8017 - (31,73,928 - 81,127) ARE DELETED. THIS GROUND OF APPEAL IS PARTLY ALLOWED . 5. WE HAVE HEARD BOTH THE PARTIES STRONGLY REITERAT ING THEIR RESPECTIVE STANDS. THERE CAN HARDLY BE ANY DISPUTE THAT THE A SSESSEE IS A CRICKETER RECEIVING MATCH FEES/RETAINERSHIPS FROM VARIOUS CRI CKET BODIES AS DECLARED UNDER THE HEAD INCOME FROM BUSINESS AND PROFESSION . THE ASSESSEE HAS FURTHER CLAIMED THE IMPUGNED EXPENDITURE AGAINST TH E SAME IN TWO ASSESSMENT YEARS IN QUESTION. LEARNED COUNSEL REPRESENTING AS SESSEE CLARIFIES THAT THE ASSESSING AUTHORITY ITSELF HAD VERIFIED CORRECTNESS OF THE IMPUGNED EXPENSES. THE SAME HOWEVER DOES NOT EMANATE FROM THE ASSESSME NT ORDER. WE FURTHER FIND THAT NEITHER THE ASSESSING OFFICER NOR THE CIT (A) HAS SOUGHT TO ESTABLISH A DIRECT NEXUS BETWEEN ASSESSEES PROFESSIONAL INCOM E FROM PLAYING CRICKET ALONG WITH HIS EXPENDITURE IN QUESTION CLAIMED U/S. 37 OF THE ACT. IT IS NOT OUT OF PLACE FOR US TO REFER TO THE ABOVE STATUTORY PRO VISION ALLOWING DEDUCTION OF EXPENSES WHICH ARE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS. IT IS EVIDENT TO US THAT THE LEARNED CIT (A) HAS MERELY DRAWN HIS CONCLUSIONS QUA GENUINENESS ASPECT INSTEAD OF ESTAB LISHING THE ABOVE STATED NEXUS BETWEEN EACH HEAD OF EXPENDITURE VIS--VIS AS SESSEES TAXABLE INCOME DECLARED. WE DEEM IT APPROPRIATE IN THESE FACTS AN D CIRCUMSTANCES THAT THE ISSUE IN QUESTION REQUIRES ASSESSING OFFICERS RE-A DJUDICATION IN ACCORDANCE WITH LAW AFTER AFFORDING ADEQUATE OPPORTUNITY OF HE ARING TO THE ASSESSEE SO AS ITA NOS. 140 & 141/AHD/2016 (DCIT VS. SHRI PARTHIV A PATEL) A.YS. 2009-10 & 2012-13 - 6 - TO PROVE THE ABOVE DIRECT NEXUS. WE THUS ACCEPT RE VENUES SOLE SUBSTANTIVE GROUND FOR STATISTICAL PURPOSES IN BOTH ASSESSMENT YEARS. 6. THESE TWO REVENUES APPEALS ARE ALLOWED FOR STAT ISTICAL PURPOSES. [PRONOUNCED IN THE OPEN COURT ON THIS THE 31 ST DAY OF JANUARY, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 31/01/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0